Weekend reading links

1. Heat impacts productivity and lot else. Therefore the need for airconditioning.

Once indoor temperatures rise above the low-twenties centigrade, or around 75 Fahrenheit, humans start to suffer. Sleep duration and quality fall rapidly when temperatures rise above 23C. Cognitive performance fares similarly, with scores in US high school tests dipping on hot days, and the affected students suffering a lasting impact on their prospects of graduation. The same is true of office workers’ productivity, which peaks at around 21C and rapidly deteriorates as the mercury rises. And that’s all before we get on to mortality, where death rates climb steeply once temperatures hit 30C.

2. Lessons for life from Roger Federer.

In tennis, a small, consistent edge over your opponent can translate into big margins in the long run. Nadal, for instance, also won exactly 54 percent of his points. And when Carlos Alcaraz defeated Jannik Sinner on Sunday in the French Open final — in one of the greatest matches since the 2008 Wimbledon final — Alcaraz, the champion, actually won one fewer point than Sinner. It’s an easy concept to apply to almost any field. In 2022, Ronald van Loon, a portfolio manager at BlackRock, authored a paper on the percentage of investment decisions that need to be correct to beat market benchmarks for returns. He researched markets, crunched the numbers and came up with a number: As low as 53 percent... Federer may have only won 54 percent of his points... but he always seemed to win the points that mattered most.

The three lessons offered by Federer - effortless is a myth; it's only a point; and life is bigger than the court. 

3. The US-Vietnam trade deal depends on how the Trump administration will define "transshipment" which attracts a 40% duty.

Experts say the Trump administration’s definition of transshipment could refer to a range of practices from simply repackaging Chinese goods with a counterfeit “made in Vietnam” label or to using Chinese raw materials in goods manufactured in Vietnam. “The impact may be more limited if these 40 per cent tariffs are enforced solely for the most egregious practices of plain diversion of trade to avoid US tariffs,” said MUFG analyst Michael Wan. “In contrast, if there is a stricter determination of transshipment defined as a certain threshold of foreign value added, the impact . . . may be pronounced.” Given the Trump administration’s interest in isolating China, businesses fear a wider definition. This would be extremely damaging for Vietnam, where many businesses rely on Chinese raw materials and components, and warned that removing them would be impossible.

4. As the use of electricity, especially from renewables, to replace natural gas and other fossil fuel sources increases, countries are finding that they are falling woefully short on the associated infrastructure. Sample this from Netherlands which has even started rationing power. 

The Netherlands already has some of the highest electricity costs in western Europe because of the grid bottlenecks... To cover the necessary investment, tariffs are expected to increase each year until 2034 by an average of between 4.3 and 4.7 per cent in real terms, a presentation from national grid operator Tennet said. To free up capacity, Tennet and regional grid operators have started to offer contracts to households that discount electricity used at non-peak times, such as between 11am and 3pm, and other flexible contracts that allow users to pay for electricity in time blocks. From April 1, operators could offer contracts where large industrial users are barred from using their connections at all during certain busy hours in exchange for lower tariffs. The Hague has also put out a “more conscious use of energy” advertising campaign across TV and social media that asks consumers to charge bikes and cars outside of the 4pm-to-9pm peak, when the grid comes under greatest strain...

“Everything is going electric and electricity infrastructure needs to grow massively everywhere,” said Jeroen Dijsselbloem, mayor of Eindhoven. The Brainport region around Eindhoven, covering 750,000 people in several municipalities in the southern Netherlands, had lost investment because it had to ration power supply, he said. Brainport is also home to a cluster of advanced technology companies led by ASML, the maker of the world’s most sophisticated chipmaking machines. No significant new grid capacity would be installed in the region until 2027, Tennet figures show. “We need more than 100 medium-size substations and 4,000 small substations,” Dijsselbloem said. Grid operators are also short of 28,000 technicians to install the necessary infrastructure, according to Netbeheer Nederland. Companies such as Thermo Fisher, a US medical business with a base in the Eindhoven area, have maintained their growth plans but invested in on-site battery storage and solar to counter the grid congestion issues.

5. Does the US suffer from Dutch disease?

The US has Dutch disease. Its export is the dollar... The dollar lost roughly 8 per cent of its value over the past six months, which has renewed the old discussion of whether holding the world’s reserve currency is an exorbitant privilege or an exorbitant burden... In 1999, Aaron Tornell, now at UCLA, and Philip Lane, now European Central Bank chief economist, offered a theoretical framework to explain (Dutch Disease). The commodity export changed the budgeting process, they argued. After a windfall, powerful groups will fight to get their hands on any new spending. If the country has strong institutions and social solidarity, this grab for spending will fail. With weak institutions, it will succeed: instead of going to things that increase productivity, such as roads and schools, new spending goes to powerful groups, as unproductive gifts. Tornell and Lane called this the “voracity effect”. 

They applied it to data from Nigeria, Venezuela and Mexico, but if we accept that the US is not magic, we can easily ask these questions of it, too. How voracious are its powerful groups? How strong are its institutions? The answers in order are: quite, and not as strong as we’d thought. The voracity effect does help explain the gobsmacking audacity of Donald Trump’s so-called “Big Beautiful” Bill, with a cost of $3.4tn over 10 years and the benefits going overwhelmingly to the wealthy. In the past, Republicans have attempted to present tax cuts for the rich as a policy to release productive investment. They’ve even attempted to model this idea as a process called “dynamic scoring”.

6. The balance sheet of six months of Trump tariffs.

Chinese exports to the US fell 9.9 per cent year on year in renminbi terms between January and June... Exports to countries in the Association of Southeast Asian Nations, which the US accuses of transshipment of Chinese exports, rose 14.3 per cent, while imports increased 2.3 per cent in the first half.

7. The Israeli economic miracle

In tech-driven Israel, GDP per head has nearly tripled since 2000 to more than $55,000, rising from 50 to 70 per cent of the level in the US... Its $550bn economy is now among the largest 30 in the world... Total factor productivity, which captures how well labour is using new machines, has grown four times faster in Israel than in other developed economies over the past 25 years... Perhaps the most telling sign of its dynamism is that Israel now spends more than 6 per cent of GDP on research and development — more than any other nation and over double the global average... Since the early 2000s, as most other developed governments have increased spending and debt, Israel has cut state spending from 50 to 40 per cent of GDP, and public debt from a high of 90 per cent to under 70 per cent of GDP. The government also made some smart investments, seeding the venture capital industry that helped to launch the nation’s vaunted tech sector... Spillovers from defence have made Israel a global leader in fields from air-traffic control to, above all, cyber security. With more start-ups per head than any other country, its business culture is closer to that of California than the Middle East. It has 73 start-ups in the hot field of generative artificial intelligence, the third largest in the world. Half of its exports are tech products.

8.  Akash Prakash on corporate India

One of the clear takeaways when speaking with senior people working with Apple is their disappointment at the lack of willingness among India Inc to step up and make the investments needed to bring the Apple ecosystem into India. While China is putting up obstacles, the profit focus of Indian entrepreneurs is also a stumbling block. Whether it is putting up the component supply chain or making large capital investments for display units, there is a lack of interest on the part of large Indian groups to commit capital. They cite the low margins on offer and the intense scrutiny that Apple demands on quality and scale. In effect, it would take years of sustained effort to earn a reasonable return on capital — if at all. Is it worth it? Many believe they would be derated by their shareholders, who would not accept the initial losses and question the ultimate return on capital. With a drop in margins will come pressure on valuations and market capitalisation — this is the common belief among Indian industrialists. Indian markets are hyper-focussed on profitability and return on capital.

9. FT long read on BYD, China's battery and EV champion. 

Until recently, the main advantage Chinese EV manufacturers had over Tesla was that their products were significantly cheaper. But in February, BYD’s founder Wang Chuanfu stood on stage in Shenzhen and unveiled “God’s Eye”, an advanced driver-assistance system that is a precursor to fully autonomous vehicles. A month later, Lian, who now heads BYD’s automotive engineering research institute, was on stage with Wang to announce a new battery charging system capable of adding a driving range of about 470km in five minutes — a fraction of the time it would take a Tesla to charge to that level. The startling technological advances made by BYD and others have sparked panic among legacy carmakers, who have responded by partnering with Chinese rivals to learn how to build vehicles faster and cheaper, and with better software.

10. Unless I'm missing something, the Chinese have definitively outsmarted Trump and the US by being able to link the relaxation of its export controls on rare earths with a similar US relaxation of restrictions on the export of advanced semiconductor chips. The latter has been in place since the Trump 1.0 and has progressively tightened. The Chinese export controls on rare earths were introduced in response to the Trump reciprocal and higher tariffs on China. The US ceded ground by both sharply reducing its steep tariffs (which would have been a significant blow to the Chinese economy) as well as making concessions on its export controls on advanced chips. 

Now that the linkage is established, the Chinese will use the rare earths instrument to combat both tariffs and export restrictions.

This is a good article about how Nvidia's Jensen Huang charmed Trump and convinced him to lift the ban on the export of its powerful H20 chips. One more example of how corporate America's commercial interests have trumped America's national interests. It also underlines the point that President Trump has no deep interest in containing China. 

11. As Donald Trump warms up to Ukraine, even suggesting that the US could supply missiles to Ukraine if it could target sites deep inside Russia, including Moscow, Janan Ganesh makes some very important points about Donald Trump.

Trump and Maga are no longer the same thing. His movement — the intellectuals, the donors, the more online of the grassroots — have intense beliefs. Besides a life-long conviction that running a current account deficit with another nation constitutes “losing”, he doesn’t. None of this is fatal to Trump himself. He papers over the differences with force of charisma, electoral success and the dutiful enactment of key Maga priorities. This will protect him from serious internal dissent... Still, we can now see what the future of the US right looks like. Unless the Republicans find another version of Trump — someone whose star power overwhelms all philosophical reservations about him or her — the next leader will have to be more in tune with the movement. That is, more Christianist, more nationalist, more paranoid. An extreme right-winger can put up with half a loaf under Trump because he provides so much else in dazzle and tribal leadership. You aren’t getting that with JD Vance. Ideological and even personal litmus tests, which have been waived for Trump, could return. In other words, we have to entertain the notion that Trump is a moderating influence on a movement that will become much more doctrinal once he is gone. He approaches the world through personal relations, which are malleable, not ideas, which aren’t. 

Consider Ukraine policy. In all likelihood, Trump has been soft on Putin because he appreciates the Russian’s well-aimed flattery and resents the cost to the US of protecting Europe from him. This is bad, but it isn’t dogmatic. Much of Maga, in contrast, backs Putin out of a belief that Russia is nothing less than Christendom’s frontline, whether against Islam or secular Chinese communism or the woke enemy within. Because it is practical, Trump’s position can be shaken, as seems to be happening now... There are worse things than a personality cult, such as an ideas cult. For a decade, conservatism has been whatever Trump says it is. He has made it possible to regard China as the threat of the century but admire Viktor Orbán, who is China’s biggest friend in Europe; to oppose vaccines but not the president who oversaw the Covid vaccine; to view Ukraine as another region’s problem but Iran as a core US interest. This is an intellectual farrago, but it might be preferable to hard, consistent doctrine... Trump doesn’t share the movement’s interest in the fate of “western civilisation” and other grandiose abstractions. He is not much of a China hawk: his concern is the bilateral trade data, not the grand strategy, much less the contest of values. As for religion, we can’t know another person’s inner life, but come on.

12. China is staring at zero interest rates.

The release of China’s second-quarter growth data this week... real economic expansion was strong and steady at 5.2 per cent but widespread falling prices meant nominal growth was much weaker, at 3.9 per cent... The central bank’s benchmark seven-day reverse repo rate, following a series of gradual cuts, now stands at 1.4 per cent... The yield on China’s 10-year government bond has been hovering around 1.7 per cent, near historic lows, suggesting investor expectations of persistent disinflation... The average interest margin at China’s top six state lenders fell to 1.48 per cent in the first quarter, its lowest level on record, compared with more than 2 per cent in 2021... At most Chinese banks, the interest rate on demand deposits is 0.05 per cent, while one-year term deposits yield less than 2 per cent.

13. Europe's rural depopulation

In the decade to 2024, the estimated number of people living in predominantly rural EU regions fell by nearly 8mn, an 8.3 per cent drop, while the urban population rose by over 10mn, or 6 per cent. Regions making up about 40 per cent of the EU’s land area and containing almost one-third of its population, are experiencing a sustained drop in residents. Dwindling numbers mean shops and bars are forced to close, buses run less frequently, doctors are harder to find, and classrooms become emptier. This fuels further departures, in what the OECD describes as a vicious cycle... Depopulation threatens Europe’s cultural heritage, local languages, cuisines, crafts, farmland, traditions and even national security... Attempts at reversing the trend range from selling houses for €1 to encourage new arrivals to restore them, to subsidising vital services and repurposing civic buildings so they can serve several different functions. Some areas are turning to tourism, encouraging second-home ownership even as some other areas turn against it... the EU’s rural population is forecast to shrink by 18 per cent by 2100, with some areas — including in Bulgaria, Croatia, Portugal and Lithuania — expected to lose one-third of their rural inhabitants or more.

 

14. China is snapping up mines across the world at record rates.

Chinese companies had become adept at snapping up mining assets from western rivals in recent years, often being willing to take a longer-term view on valuations and invest in riskier jurisdictions... The most active Chinese mining groups in overseas deals include CMOC, MMG and Zijin Mining. Chinese financial institutions have also issued billions in loans for minerals mining and processing projects in the developing world... Chinese companies were positioning themselves to benefit from resource nationalism in nations such as Mali. Some military governments in Africa have sought to take control of western mining assets and are demanding higher royalty payments. Chinese companies are often prepared to accept a less lucrative arrangement if they can take over the running of the asset.

15. As China grapples with overproduction and deflation, President Xi has warned against excessive production in EVs, computing power (data centres), and AI. 

“When it comes to projects, there are a few things — artificial intelligence, computing power and new energy vehicles. Do all provinces in the country have to develop industries in these directions?” Xi told the Central Urban Work Conference, a rarely held high-level Communist party meeting on urban development.

Since September 2022, Chinese producer prices have been in a deflationary trajectory.

In articles across state and party media, Chinese President Xi Jinping and other leading officials have attacked what they call neijuan, or “involution”, meaning excessive price competition... Beijing is growing increasingly wary that surging industrial output, coupled with weak consumer demand at home, is fuelling a race to the bottom in prices that is entrenching deflation and fuelling tensions with the country’s biggest trading partners. Official data is expected to show on Wednesday that factory gate price growth remained negative in June for a 33rd consecutive month, one of the country’s longest such falls in decades. Overcapacity is a sensitive issue for China, which has sought to dispel complaints that its industrial policy has flooded its partners’ markets with artificially low-cost goods.

16. Important decision by the University of California's $190 bn endowment fund to completely exit its hedge fund investments. 

UC Investments in a meeting on Tuesday approved a plan to reallocate its 10 per cent absolute return portfolio — or its investments in hedge funds — to public equities, finalising a wind-down that began five years ago. Jagdeep Singh Bachher, chief investment officer of UC Investments, one of the largest institutional investors in the US, sharply criticised the industry in a recent meeting for not delivering for clients... He added that UC Investment’s hedge fund positions had undermined its overall performance by introducing risks during market upheavals in 1999, 2008 and 2020. “In each of those three scenarios, hedge funds didn’t hedge us,” he said. “They exposed us to the opposite kind of risk, which actually meant they hurt us.” The move underscores concerns among asset allocators about hedge fund investments that come with unstable returns and high fees that have ballooned in recent years.

Weekend reading links

1. A reality check on who owns agricultural land in South Africa.

White farmers still own roughly half of the country’s land although only 7 per cent of citizens are white.

2. Tej Parikh has a very good graphical summary of America's healthcare market.

The US spends more than $4.5tn annually on healthcare — and is projected to soon account for one-fifth of its economy. Even on a per capita basis, other large, rich nations spend about half as much as America. Healthcare is the largest component of US consumer spending on services (well above expenditure on recreation, eating out and hotels)… The economy has created 3.9mn private sector jobs since the start of 2023. More than half have come from healthcare and social assistance… studies have estimated that approximately 25 to 30 per cent of health spending could be considered waste.

Healthcare is such a major contributor to growth that any reduction will automatically impact job creation and economic growth. 

3. ExxonMobil, Occidental Petroleum, Equinor, and others are piloting a new drilling technique for lithium, direct lithium extraction (DLE), in the Smackover Formation area of the Southern US that has a massive brine aquifer. 

Underground brine reservoirs flowing across Arkansas and neighbouring states contain high concentrations of the silvery-white metal; a US Geological Survey study published in October estimated the total resource in south-west Arkansas alone at up to 19mn tonnes... “DLE could do for the US lithium industry and economy what fracking did for the US oil industry almost 20 years ago,” says Andy Robinson, a geoscientist and co-founder of Standard Lithium, which is seeking to develop a $1.5bn project near El Dorado in partnership with Norwegian energy group, Equinor.

Proponents say DLE offers a faster and less environmentally damaging alternative to existing extraction methods. For oil companies, which have extensive skills in drilling, pumping and processing fluids, it represents a useful way to diversify their businesses... But experts warn that US lithium pioneers must prove the new technology can be commercially successful at scale and compete with both existing extraction technologies and rival DLE projects in lower-cost countries...

Between 2020 and 2024 global demand for lithium tripled to around 1.2mn tonnes, according to energy research group Wood Mackenzie, which is forecasting lithium consumption will reach 5.8mn tonnes by 2050. To meet demand, producers have over the past decade expanded hard rock mining in Australia and China and lithium brine extraction in Latin America, giving these three regions control of more than 80 per cent of the extraction industry. Hard rock mining of lithium is much like any other metal production process; ores such as spodumene are excavated from open pit mines, crushed and chemically processed to separate the lithium. Brine extraction involves pumping lithium-rich brines into large ponds, typically in regions with a hot, dry climate. The water gradually evaporates, leaving behind concentrated lithium salts that can be processed...

Until recently, US-based lithium miners have struggled. They face higher costs, tougher mining regulations and less favourable geological and climatic conditions than in the “lithium triangle” in Chile, Argentina and Bolivia. The development of direct lithium extraction, which usually involves using solvents or ceramic materials to separate lithium from the brines, has changed all that. DLE takes a matter of hours to separate lithium from brines, while evaporation ponds can take as long as 18 months. Recovery rates are around 70 to 90 per cent, according to Wood Mackenzie, compared to 40 to 60 per cent for evaporation ponds, and DLE also uses less land and less water. Combined with the discovery of high concentrations of lithium in oilfield brines within the so-called Smackover Formation, which extends across Arkansas, Louisiana, Texas, Alabama, Mississippi and Florida, DLE has opened up an opportunity. Existing oil and chemical infrastructure in the formation also makes these resources more accessible than greenfield sites.

4. Great primer in NYT that has the list of all items Americans import from China. Goods that Americans import mostly from China.

The highest value of goods imported from China.

And America's biggest exports to China.

5. Tata Electronics bets big on iPhone manufacturing. But it comes with exacting standards on quality and productivity.

The company’s ambition to become an iPhone-manufacturing hub collides with the reality of high attrition, relentless production targets, and the ever-present pressure of Apple’s quality control. Inside the factory, each worker undergoes two to three weeks of intensive training before stepping onto the assembly line. Once there, their tasks are highly compartmentalised—a deliberate strategy to protect Apple’s intellectual property. Most workers only know how to assemble a specific section of the phone, with little visibility into the broader production process... An iPhone must pass through at least 600 quality checkpoints before it leaves the factory. A single defect can jeopardise an entire batch, sending costs skyrocketing and potentially damaging the supplier relationship. This is why Tata has invested heavily in automated equipment from suppliers like Delta Electronics, aiming to reduce defect rates and increase efficiency... the workers... shifts are standard eight-hour stints—6 am to 2 pm, 2 pm to 10 pm, or 10 pm to 6 am... That compartmentalised operation is about efficiency but also about Apple’s intellectual property. Keeping workers focused on their slice of the process helps prevent any accidental leaks of trade secrets.

6. Starlink compared to other telecom companies.

Also this article on Business Standard.

7. China tries to increase its soft power. The one area it appears to be having some success is gaming. 

Four of the ten highest-grossing mobile games of 2024 were made in China. One such is Genshin Impact, a role-playing adventure which rakes in over $1bn a year. Last year a Chinese firm released Black Myth Wukong, the country’s first blockbuster video game. Featuring the mischievous Monkey King, it is steeped in Chinese folklore. Some 30% of its 25m players are said to be outside the country.

8. One of the genuine successes of the Indian state, the taming of the Naxalite movement, which is perhaps in its end stages.  

9. Global Capability Centres (GCCs) are driving a boom in Grade A real estate in India that are ESG-compliant, and equipped with smart technology systems. 

Between 2022 and the first half of 2024, GCCs have leased 53 million square feet (msf) of office space. In 2024, they accounted for 36 per cent of total leasing activity, occupying 27.7 msf of the 77.2 msf transacted... The momentum has continued into Q1 CY25. Colliers reported that GCCs absorbed 6.5 msf of Grade-A office space in the quarter — constituting 41 per cent of overall office space demand across the top seven cities in India... In Q1CY25, GCCs leased 88 per cent of the total office space in green buildings as part of their broader commitment to achieving carbon neutrality...

According to Vestian’s sustainability report, green-certified office buildings commanded an average rental premium of 12–14 per cent over non-certified buildings. GCC-occupied office space in Bengaluru has been leased at a 50 per cent premium compared to non-GCC-occupied office space in FY25. The premium is 13 per cent in NCR and 9 per cent in Hyderabad... office rentals across the top Indian cities have grown between 9 to 28 per cent from 2022 to 2025, mainly driven by GCCs... real estate costs for the GCCs are not more than 6-7 per cent of their total cost of a GCC setup, which does not deter them from going for high-quality locations... According to Nasscom-KPMG report, the GCC market size in India tripled from $19.6 billion in FY15 to $64.6 billion in FY24. It is further anticipated to touch $110 billion by 2030, despite ongoing trade tensions and geopolitical frictions.

10. US-India pre-Trump merchandise trade tariffs.

11. Bola Tinubu's shock therapy appears to be working for the Nigerian economy.

On day one Tinubu removed a ruinously expensive fuel subsidy. More important still, the central bank has restored monetary policy orthodoxy after a shambolic era in which only cronies with access to cheap dollars benefited. After a dangerous overshoot, the naira has stabilised, with the gap between the official and black market rate shrinking to almost nothing. The central bank has stopped printing money to pay for government profligacy. Politicians still spend too much, often on fripperies like an extravagant presidential jet, but at least the government has begun to increase tax receipts. Investors do not live in constant fear of a devaluation and can readily access dollars. That may eventually help Nigeria to diversify, but shorter term it is positive that oil production has recovered from a nadir of 1mn barrels a day to nearly 1.5mn last month. Oil theft has been reduced and local companies are squeezing more out of marginal fields.

12. The decline of net FDI into India.

In 2020-21 and 2021-22, gross FDI inflows were adversely impacted by repatriation and outward investments to the tune of 46 per cent and 54 per cent, respectively. The extent of this impact rose sharply in the following three years — to 61 per cent in 2022–23, 86 per cent in 2023–24, and 99 per cent in 2024–25... the amount of repatriation and disinvestment in 2019-20 was about $18 billion, or about 25 per cent of gross FDI inflows. But the following two Covid years saw repatriation and disinvestment rising to account for a 33-34 per cent share of gross FDI inflows. In 2023-24, this trend became alarming, with the share of repatriation and disinvestment in gross FDI inflows jumping to 62 per cent. In 2024–25, the share inched up further to 63 per cent.

What this implied was pretty serious. Foreign investors in Indian companies were showing a marked preference for ploughing back their gains from here to reinvest in other markets elsewhere. Note that this trend has continued for the last two years... Indeed, reinvested earnings by existing foreign investors have stayed at well below a third of gross FDI inflows in these years. Nor has there been a marked desire on their part to increase reinvested earnings... Contributing to such gloomy prospects on the net FDI inflows front is last year’s data that shows how Indian companies are raising their outward FDI in a big way. Indian companies have stepped up their outward FDI during the post-Covid years — from $14 billion in 2022-23 to $16.6 billion in 2023-24, and to $29 billion in 2024-25.

In 2024-25, while India attracted $81 bn in FDI, foreign firms repatriated over $51 bn, and Indian firms' outward investment was $29.2 bn, leaving the net FDI inflows at only $0.35 bn. 

13. In a bid to overturn a system that the government believes is biased against it, Mexico goes to polls on June 1 to elect judges!

In elections on June 1, Mexico will replace almost 900 judges at the federal level and hundreds more across 19 state-level jurisdictions in a voting process never tried elsewhere that was implemented in just eight months... A random lottery decided which half of federal judges would be replaced on Sunday, and which in 2027. Most candidates for the vote were chosen by the ruling party and were not allowed any public or private funding. Some are openly associated with the ruling Morena party... The electoral institute expects turnout of about 8 to 15 per cent, compared with more than 60 per cent in last year’s presidential election... “Less than 1 per cent understand what they are voting for,” Jorge Sepúlveda, vice-president of the Mexican Bar Association. “Those that’ll vote will mostly be people propelled by the government.”... In Mexico City, voters must fill out nine ballots, choosing about 50 names from a choice of almost 300. Specialist judges were assigned to certain districts, meaning voters in parts of the capital will choose all the country’s competition and telecoms judges... An all-powerful disciplinary tribunal will be able to remove judges. Of 38 candidates for that, at least 10 have ties to the ruling party, including two who worked directly for López Obrador... One anti-corruption group identified 17 “high risk” candidates in judicial elections, including one who had worked for the Sinaloa Cartel’s leader and another who had worked for the leader of the Los Zetas criminal group. Saúl López, professor at Tecnológico de Monterrey’s school of government, said that the new system would offer “the maximum degree of capture, not just by organised crime but other economic powers”.

14. The disturbing monopoly in cloud computing.

Unlike traditional utilities, the dominant cloud providers Amazon, Google and Microsoft — which together control two-thirds of the global market — operate with minimal transparency or public oversight. This leaves governments, businesses and citizens vulnerable to systemic risks, while giving these corporations immense power to shape the digital economy to their advantage. It is no accident that the same behemoths that dominate ecommerce, digital advertising and operating systems also control the cloud computing infrastructure that underpins these services. Cloud is an extraordinarily capital-intensive business, with high barriers to entry and significant network effects. The data, technological capabilities and financial reserves controlled by these behemoths secured them advantages that smaller, independent rivals simply couldn’t match when cloud computing began to take off. But the companies haven’t just benefited from structural advantages; they’ve also engaged in anti-competitive practices, as documented by competition authorities across Europe, the US, Australia and Japan. These include opaque and discriminatory pricing, technical barriers to switching provider, excessive fees for data transfers and bundling cloud services with other products...

The dependence of many nations on a small number of US cloud giants is a geopolitical threat. Several existing US laws — including the Cloud Act — require providers to hand data to the American government when asked, even if stored on foreign soil... Big Tech’s cloud oligopoly undermines innovation. In artificial intelligence, for example, tech giants have been accused of trading cut-price access to cloud resources for intellectual property rights, equity stakes and strategic influence over leading start-ups, reinforcing their dominance across the sector.

Possible responses to this monopoly

Fortunately, most of the tools we need to address these problems already exist. Established frameworks — including utility regulation, competition policy and public procurement — can be drawn on to restructure and govern cloud infrastructure in the public interest. For instance, regulators should mandate fair and non-discriminatory access to cloud services, mirroring rules already applied to telecoms. This should include transparent, consistent pricing and a ban on unfair contract terms. Providers should be required to implement robust processes to ensure the stability and security of their infrastructure, with regular audits and stress tests. Governments should also rethink their procurement practices. Public institutions should not reinforce monopoly power by defaulting to the dominant providers. Finally — and most ambitiously — governments should consider structural separation. Requiring Amazon, Google and Microsoft to spin off their cloud divisions would eliminate their ability to use this critical infrastructure to extend their dominance into new markets.

15. With high tariffs comes trade crime.

In April, for example, Chinese exports to the United States fell 21 percent from a year earlier, but Chinese exports to Southeast Asian countries rose by the same percentage... An analysis by Exiger, a data analytics firm, found that more than 3,000 companies in Mexico depended on Chinese shipments for 75 percent or more of their supply chain. Many of these companies are subsidiaries of Chinese state-owned enterprises, and most sell products to the United States, the report said.

16. As PSG faces Inter Milan in this weekend's Champion League final, Simon Kuper writes that Paris has become global football's biggest talent pool.

Paris finally acquired a serious football club in 1970, when little Paris FC and Stade saint-germanois merged into PSG. (Paris FC soon walked out again.) At the time, the city’s growing suburbs, the banlieues, were filling with kids who had few entertainments besides football. In new towns short on markers of belonging, millions grew up supporting PSG as a way to feel Parisian. The popular claim that it’s a fake club with money but no fans is nonsense. The French state funded accredited coaches and artificial pitches in the banlieues. Soon, Greater Paris was producing more top footballers than certain continents. French teams packed with Parisians have reached four of the seven World Cup finals since 1998, winning two, and losing two only on penalty shoot-outs. The previous time PSG reached the Champions League final, against Bayern Munich in 2020, they lost to a goal by Bayern’s Parisian exile Kingsley Coman, but Parisian talent goes a long way down... PSG’s rise began in 2011, when the French president Nicolas Sarkozy, a fan, encouraged a wing of Qatar’s state to buy the club for a piffling €70mn or so. Sarkozy rooted out the hooligans, and Qatar bought superstar players. Two years ago, PSG’s front three were Kylian Mbappé, Neymar and Leo Messi. Yet PSG fans (I have two in my apartment) prefer today’s younger, harder-working, less-spoilt side.

17. Manish Sabharwal has a good compilation of "regulatory cholesterol"

Can women in India work the same jobs and the same way as men? No, they are banned from 32 operations and 200 sub-processes, including pottery manufacturing, cashew-nut processing, and glass manufacturing. Can employers think about hiring men and women for night shifts similarly? No: Women attract 59 special conditions for employers across states. Can factories use all their land? No: Fifty per cent of an industrial plot is lost to just three standards; micro and small factories lose the most land to standards more stringent than those of countries 10 times richer. Can workers work the hours they want? No: A factory worker loses 270 plus hours of annual earnings to working hour restrictions, and these limits force workers to give 156 to 416 fewer hours in a quarter than in Japan. Is building one 300-worker factory cheaper than two 150-worker factories in India? No: One 300-worker factory needs 40-80 per cent more land than two 150-worker factories. Do India and Singapore require the same number of floors to build a hotel with the same number of rooms? No: The same number of rooms requires three floors in Singapore and seven in Noida. Can all of rural India industrialise? No: Fifty per cent of rural areas cannot be industrialised due to minimum road width norms.

Weekend reading links

1. Ruchir Sharma makes an important point about the norm in the financial markets and central banking today.

If you remember a couple of weeks ago, there was a big stock market correction around the world, and it was incredible to see what the reaction was. Everybody was going on television saying ‘the Fed needs to cut interest rates’. Now the market has been going up for such a long period, it falls for just one day, and all of a sudden it’s like ‘monetary policy is too tight! We need to cut interest rates! Let’s rush out the cavalry!’. That just tells you about what the thought process has become. And I think one of the unfortunate things which has developed is this asymmetry which has crept up in markets, which is that on the upside we have capitalism, but on the downside it’s socialism. The moment there’s too much of a downside, there’s rising clamour for a rescue... easy money is a suite of government habits, and it’s not just about central banks. The habits include the tendency to bail out private sector companies at the slightest hint of trouble, the zealousness to micromanage business cycles, etc... the analogy I use in the book is of pain management in America, which is that for the slightest hint of trouble, you give people opiates, and so the whole system becomes addicted to opiates...

One of the fundamental concepts of capitalism in the market is mean reversion, which is that eventually excess profits should get competed away and you should keep getting churn, which is that new winners emerge and the old players keep dying. But this whole concept has been undermined now because of this extensive government involvement, whether it’s too easy money, bailouts or regulations which benefit the big businesses enormously. I think that’s what’s become a real problem today, that the concept of mean reversion has been distorted.

2. Vivek Kaul points to how a generation of young Indian stock market investors have piled on to create the ongoing stock market boom in the country.

The number of individuals carrying out intraday trading has jumped from 1.5 million in 2018-19 to 6.9 million in 2022-23, with these figures being limited to the top ten stock brokers...On average, 71 out of 100 intraday traders in stocks lose money. It stood at 65 out of 100 in 2018-19... Also, a bulk of those carrying out intraday trading are youngsters. In fact, in 2018-19, only 18% of those carrying out intraday trading were under 30 years of age. In 2022-23, this had jumped to 48%. Which means that a bulk of the newer intraday traders are under 30 years of age... In fact, data released by the National Stock Exchange in early August tells us that in March 2018, the unique registered investors under the age of 30 formed around 22.9% of the total unique registered investors. In July 2024, it stood at 39.9%, implying that nearly two in every five investors in the stock market are under thirty years of age. In fact, the share of those in the 30-39 age group has remained stable, whereas the share of those over 40 has come down.

3. US public debt fact of the day

The US debt to gross domestic product ratio is heading far above 100 per cent, debt servicing costs are already 12 per cent of total government outlays and a third ($9tn) of government bonds must be refinanced in the next year alone.

4. The Government of President Patrice Talon in Benin is following in the footsteps of Paul Kagame in Rwanda and is trying to transform the country's economy by establishing manufacturing facilities.

Benin, a nation of 13mn people, is trying to achieve what few African countries have managed: systematically transform raw materials — not just cotton, but also raw cashew nuts, soya, shea and even human hair for wigs — into finished goods. Until now, like many poor countries, Benin has been trapped in a trading pattern in which it sells cheap raw commodities and imports expensive finished goods... Virtually its entire cotton crop, of about 300,000 tonnes of lint cotton, is exported raw, mostly to Bangladesh, where it is transformed into clothing for the world’s $1.5tn fast-fashion industry. In selling raw cotton, Benin, Africa’s biggest producer, is missing out on more than 90 per cent of the value, according to industry experts... In the Glo-Djigbé industrial park north of Cotonou, Benin’s commercial capital, where 12,000 workers are already employed, the vast air-conditioned integrated textile factory — at 160,000 sq metres equivalent to about 22 football pitches — is filled with rows of whirring machines from Switzerland, Germany and Japan. More than a thousand new recruits are cutting and sewing fabric that is being produced at the rate of 50,000 kilos a day...

According to the World Bank, the percentage of manufacturing value added in GDP for sub-Saharan African states, excluding high-income countries, has fallen from 18 per cent in 1981 to 11 per cent in 2023. Benin, with a GDP per capita of about $1,400 at market prices, is only at 10 per cent... The textile and apparel factory north of Cotonou, which will also produce bed linen, towels and garments such as polo shirts and leggings, is part of a national industrialisation strategy intended to quintuple the country’s manufacturing capacity by 2030. The finance ministry estimates that manufacturing contributes 9.8 per cent to GDP, but says that more than two-thirds of this is artisanal manufacturing. The formal industrial sector, restricted to a few activities such as cotton ginning, contributes only 3 per cent to GDP. If the entire cotton crop were processed into apparel, it would at a stroke add $12bn to Benin’s $17bn economy, say industry experts... To meet Benin’s goal of manufacturing its entire cotton crop at home would mean attracting investments in around 25 new factories... In just 18 months, five factories have been built to transform the country’s entire crop of cashew nuts into packaged goods. Previously they were all sent to Vietnam for processing and packaging, but this change increases their value to Benin’s economy 10-fold, he says.

5. This is such an important but hardly discussed fact amidst the debates on climate change - the main perpetrators of the stock and flow of carbon emissions are those economically well-off, both among nations and people, and unless they dramatically mend their ways there's no meaningful path to address the problem.

Amidst the controversy over Starbucks, a self-declared ESG leader, recruiting a CEO who'll travel to work daily over a 1600 km flight, this report raises some important points.

The richest 1 per cent of humanity is responsible for more carbon emissions than the poorest 66 per cent, according to a 2023 joint investigation by The Guardian, Oxfam, the Stockholm Environment Institute and other experts. “[T]his elite group, made up of 77 million people including billionaires, millionaires and those paid more than $140,000 (£112,500) a year, accounted for 16 per cent of all CO2 emissions in 2019 — enough to cause more than a million excess deaths due to heat,” the investigation revealed.

6. Important point about aid transfers

In the two and a half years since the Russian invasion, Ukraine has received more aid and debt relief than any African country in the past few decades. Unlike most other aid flows, this money has made history. It has allowed Ukraine to fight Russia to a standstill while stabilising its war-battered economy. In the “global south” it rankles that bloodier conflicts in Ethiopia and Sudan barely register in western commentary. European and US support for Ukraine shows in stark relief what is missing with regard to the “global south”: the sense of shared destiny and common purpose, necessary to unlock aid on a world-changing scale.

7. The paddy production costs and externalities

Paddy requires a minimum of 20-25 irrigations compared to less than four irrigations for pulses, oilseeds and millets. A 2023 study by the Central Ground Water Board on water tables reveals that 87 per cent of Punjab’s 153 blocks are categorised as over-exploited, critical, or semi-critical. With GHG emissions of 5 tonnes CO2 eq per hectare, paddy cultivation here is also driving climate change. Rice stubble burning is a major contributor to pollution. The successful implementation of this scheme will have a positive impact on the agriculture sustainability of the states, and the country at large.

8. Fascinating long read about Prospera Inc., a charter city incorporated in Delaware and located in  Roatan Island of Honduras in 2017. 

In 2021, Xiomara Castro, the wife of the ousted President Zelaya, made repealing the ZEDEs a central promise of her election campaign. The zones became associated with the corruption of Juan Orlando Hernández, the president at the time, whom many Hondurans now revile. Castro won with a clear majority. In 2022, Honduras’s Congress unanimously repealed the law and passed a constitutional reform that would abolish the three existing ZEDEs... There was one problem, however: Congress, mired in competing legislative priorities, failed to ratify the reform. Furthermore, the original ZEDE law guaranteed the companies 50 years of legal stability — no matter what changes were made after a zone was founded. The net result is that Próspera is in a state of legal limbo... 

But in seeking to sidestep politics, Próspera instead ran straight into them. The endemic corruption in Honduras, the sort of thing Próspera was supposed to combat, was also what enabled its creation and has plagued its pursuit of legitimacy. For Hondurans, the prospect of American capitalists promising prosperity may instead resurrect fears of exploitation and dispossession. Despite Próspera’s fantasy of exit, it uses roads, hospitals and ports built by the municipal government, and it shares an economy and ecosystem with its neighbors in Crawfish Rock. The national government that granted its right to exist, meanwhile, may still take it away. 

In 2022, the government began stripping Próspera of some of the special privileges it was granted under its predecessors. It halted the company’s tax-exempt customs service, allowing the zone to continue to import goods only if it paid the same duties as the rest of Honduras. Colindres said that the National Banking and Insurance Commission also pressured Honduran banks to shut down accounts of Próspera businesses and bar lenders from financing its projects... At the end of 2022, Honduras Próspera Inc. and its affiliates filed an astronomical $10.775 billion lawsuit against the state in a World Bank tribunal called the International Center for Settlement of Investment Disputes (ICSID). Próspera is thought to have a good chance of prevailing in part, critics say, because the court is biased toward corporations, which can bring suit against nation-states but cannot be sued by them.

9. Another rare earth mineral where China dominates, antimony.

Antimony’s flame and heat resistant properties make it crucial in the production of batteries, especially lead-acid storage batteries and those used in cars. It is also used to make other car parts including brake pads. In recent years, the global shift to green energy has created new demand for antimony. The material is able to improve transparency for the cover glass on solar cells. This super-clear glass helps the performance of solar cells and is also used in the screens of smartphones. More crucially, a long-term shortage of antimony could pose a security risk. It is a critical material in the defence supply chain, and is used in everything from nuclear weapons production to making night vision goggles, ammunition and infrared sensors. The export restrictions have yet to go into effect. But antimony prices have already hit a record high. Spot prices in Europe and China have surpassed $25,000 per tonne, more than double prices at the end of last year.

10. Malaysia is a success story in diversification away from commodities to manufacturing.

Rana Faroohar links to commodities price speculation being a contributor to price increases. 

As a recent Unctad report laid out, it is “unregulated activity within the commodities sector” that was responsible for the bulk of “speculative price increases and market instability” since the pandemic.

11. Peak-tourism in Europe?

Île-de-Bréhat, a French island off the coast of Brittany with just 400 residents, recently imposed a limit of 4,700 visitors per day... Last year, the ancient site of Acropolis introduced a ticketing system to manage visitor numbers, with a cap of 20,000 per day... Santorini, famous for its whitewashed buildings and sunsets, was one of the most overtouristed destinations in Europe last year, drawing nearly 3.5 million visitors to an island of 15,500. Cruise ships — 800 vessels brought in 1.3 million visitors — were a major source of foot traffic... the mayor, Nikolaos Zorzos, said the island would reinstate a cap of 8,000 passengers per day, down from what would have been 17,000 starting in 2025... The Barcelona city government said it would eliminate short-term rentals by the end of 2028 and announced a tourism tax increase that will go into effect in October... In April, Venice, a city of 50,000 that received 20 million travelers last year, introduced a 5 euro entrance fee (about $5.60) aimed at dissuading daytrippers from visiting at peak times... Last month, the Lisbon City Council announced that it would limit the number of licenses and parking spaces issued to tuk-tuk drivers to help ease congestion... After the pandemic, Amsterdam introduced a series of stringent measures, including a 20 million cap on annual visitors. Over the past year, tourism taxes have been raised; the number of cruise ships, which are now barred from docking in the city center, has been limited; new hotel construction has been outlawed; and vacation rentals have been restricted.

12. Russian crude exports to India surges post the Ukraine-war.

13. Important facts about government wages in India.

In India, the ratio of the average wage of a general government employee to per capita gross domestic product (GDP) is around 4—among the highest in the world. In most of Asia, that ratio lies between 1 (Vietnam, China) and 2.5 (Indonesia, Sri Lanka, the Philippines). Even South Korea, Thailand and Malaysia have a ratio of general government wage to per capita GDP of around 3-4. In the Arab world and Türkiye, that ratio is around 2-3. India’s government, contrary to popular belief, is small relative to its needs but extremely expensive relative to its income. It is also highly interventionist without the personnel or the capability to deliver effectively... The 7th Pay Commission identified the compression ratio as 3.12 for entry-level employees at Grade A compared to Grade C, and 3.74 for the highest paid at Grade A compared to Grade C. The upper end of the civil service has seen its real wages fall well below that of the private sector, whereas at the lower end, salaries (including benefits) can be more secure and are even higher than in the private sector. This has meant that the pay, and as a result the quality, of the inductees at the higher end, with discretionary decision-making authority, has declined, whereas those at the lower end, who make up more than 90 per cent of the government labour force, end up earning a much higher wage than in the private sector. No wonder many people want a government job.

14. Two graphics on India's poor sporting record. One, on Olympic medals.

The second is on the country's non-sporting culture.

15. The Economist has a good summary of why Thailand is the poster child for healthcare.

The average Thai can expect to live to 80, much longer than their regional counterpart... Last year a whopping 99.5% of the population of 72m was covered by health insurance. Remarkably, Thailand has achieved this as a developing country: its income per person was roughly $7,000 in 2023... in the 1970s, Thai policymakers focused on rural development. Public health became a priority, so a wave of spending was unleashed on infrastructure. By 1990 all 928 districts had a hospital. Investment in people also helped. In 1972 the government launched a programme that required medical graduates to spend the first three years of their careers in villages. This led to a “golden generation” of doctors, says Eduardo Banzon of the Asian Development Bank.

Subsequent Thai governments made health care more affordable. The first big initiative was an insurance scheme targeting the poor. This was followed by state-sponsored schemes for those working in the informal and private sectors. But the big boost came in 2002 when the government rolled out a universal health-coverage programme, which offered free health care to the poor and a nominal 30-baht ($1) fee for others... its coverage has expanded. Today it covers treatments for conditions ranging from hiv to kidney diseases. But an equally important feature of the programme is the focus on preventive health care, says Piya Hanvoravongchai of the National Health Foundation, a non-profit. A network of grassroots workers helps provide health advice.

Particularly striking is the fact that universal health coverage is not only affordable for beneficiaries, but also for the government. The programme is funded through tax revenues, but spending is controlled. Every year district hospitals are provided with a fixed amount of money per patient in their catchment area, regardless of the treatment they get. This “capitation” model ensures efficiency and predictability in funding. Thailand’s spending on health had remained largely steady at around 3-4% of gdp until the pandemic, even as its programmes expanded.

16. Finally, on the beneficial effects of sleep.

One study found that in America an extra hour of sleep a week raised average earnings by 5 per cent, which the authors said was about as much as half an extra year of education. Another found that in Germany half an hour more sleep each week was associated with around 2 per cent higher earnings among full-time workers, with the largest effects for mothers.

Weekend reading links

1. Sobering tale of Qantas, Australian national carrier, as it pursued profit maximisation at the cost of all else,

Founded in 1920 and nationalized in 1947, the carrier was slowly privatized in the 1990s, and only 51 percent of shares in it must be held by Australians, while the rest may be held by offshore investors. Still, the Sydney-based airline is critical to the ordinary functioning of Australian life, operating 61 percent of domestic flights...

Australians bemoan that its flights are unreliable and expensive. They are aghast at how government protectionism has made Qantas by far the biggest airline in Australia and pushed up the price of travel. They are stunned by allegations that it sold tickets for flights it never intended to fly. They cannot square how Qantas unfairly laid off hundreds of workers, then handed out enormous paychecks to its chief executive and board directors... finding that Qantas illegally outsourced the jobs of nearly 1,700 baggage handlers during the pandemic, in part to prevent union action... Now, as the baying for blood intensifies, labor unions and lawmakers are calling on the company’s board to resign en masse. The anger is personal for Australians, who feel profound ownership over the carrier that bills itself as “the spirit of Australia”... Qantas is rooted in Australian aviation history and long enjoyed a reputation for safety and comfort... signing up for a Qantas frequent flier account is a rite of passage for many. The recent scandals, which many Australians see as betrayals, sting acutely... 

Qantas may be scrambling to apologize — but its balance books are in exceptional health. Last month, it posted a record annual profit of 2.47 billion Australian dollars, about $1.6 billion, as well as multimillion-dollar bonuses for the previous chief executive, Alan Joyce, and other top brass, and a share buyback program of 500 million Australian dollars. Those blockbuster results have come at a cost, with the pursuit of short-term profits above all else tarnishing the brand in some customers’ eyes, said Angus Aitken, a Sydney-based stockbroker and the founder of Aitken Mount Capital Partners. “Profitability is one thing, but you also have to look after your clients.”

2. As interest rates go up and the economic growth slows down, private equity firms are seeing their buyout deals dry up and instead private debt deals are on the rise. Buoyed by the higher interest rates, PE firms are competing with deposit taking banks to make corporate loans. 

Apollo’s private credit unit now manages more than $400bn, dwarfing the $100bn in assets under management in its buyout division, historically the cornerstone of the group’s business.

3. A now viral scathing essay by Garrison Lovely on how it feels to be working at McKinsey,

What does McKinsey do? Generally, it deploys teams of sleep-deprived, overeducated young people to solve tough problems for organizations—typically for-profit businesses, though the firm also serves many governmentsand large nonprofit organizations. If you’re a CEO who wants help evaluating whether to enter a new market or lay off thousands of employees, you might hire McKinsey. McKinsey made the prescient decision to avoid credit for its work, keeping its client and project lists secret. In practice, this has insulated the company from the disasters it was party to, such as the collapse of Enron... McKinsey was an amoral institution willing to do almost anything for almost anyone who will pay them.

4. Works in Progress article about the transformational impact of floatation technique for copper mining pioneered at the turn of the 20th century by Daniel C Jackling that allowed easy extraction of copper from even low grade ores and ushered in the electrical era. 

According to mining expert Paul Gait, if you look at the number of labour hours it takes to mine and refine a tonne of copper, it has fallen rapidly and consistently over much of civilised history. At the time of the Roman Empire the price of a tonne of pure copper was equivalent to roughly 40 years of the average wage: forty years of work. By 1800 this had fallen to six years per tonne. In the following 200 years to the early twenty-first century it dropped to just 0.06 years (or 21 days) per tonne.

This technique also brought in its wake an environmental disaster as it led to the razing down of mountains and digging of massive open pit mines to extract copper. And given the climate transition imperatives, the importance of copper will only multiply.

The average internal combustion engine car contains about a mile of copper wire. The average electric car contains three or four times more. Then there’s the many tonnes of copper we will need for all the wind turbines, solar panels and other grid infrastructure you need if you’re relying ever more on power – copper for the circuitry inside them, for the windings in generators and transformers and, most of all, for the thick, shielded cabling taking power from one place to another. All told, according to some estimates the green energy transition will necessitate us doubling the total amount of copper we use each year from around 25 million to more than 50 million tonnes.

5. India's tourism market is increasingly dominated by domestic tourists. 

Worryingly the number of foreign tourist arrivals in the 12 months to June 2023 was just 8.4 million, 21% lower than the 10.7 million for the same period ending June 2019!

On the positive side, the potential for growth is enormous

6. Two very promising graphics about the Indian economy. First, India is the least leveraged global economy.

Second, corporate debt service burden is very low.

7. Excellent FT long read on the human resource challenge facing Dyson, the British engineering group famous for its vacuum cleaners and air filters, as it tries to get employees back to office following the pandemic. 

This is a very good article that captures all the different aspects of the issue. Clearly the nature of Dyson's business demands that employees need to be physically present. And that has been the norm till the pandemic. The employees have realised the convenience and benefits of work from home and want to continue the practice. 

I don't understand the need to have an equivalence on these two positions, as the FT article appears to take. Dyson is a private business with its shareholders and its set of business requirements. If they require the workers to be physically present, then where's the need for any debate. Such moral equivalence framing is a slippery slope wherein over time the convenience of working from home starts to becoming an entitlement demanded by workers even if it comes in the way of the business requirement. What prevents the emergence of a world where one day a week is earmarked for work from home as a basic worker right? 

Even the equivalence is asymmetric. While the articles talks about employees being intimidated by the HR tactics of Dyson to get people back to work, there is no reference to the intimidation of Dyson and others by employees and the opinion makers to accommodate work from home for employees. 

8. A big story over the week was the decision by the US Federal Trade Commission (FTC) and 17 States to sue Amazon, alleging "illegal use of monopoly power to overcharge consumers, hobble competitors, and exploit sellers on its marketplace". 

The landmark lawsuit... accused the $1.3tn ecommerce giant of increasing fees to sellers on its marketplace so that it extracts nearly half of every dollar of revenue made by many sellers. The FTC also alleged that Amazon punishes sellers that discount heavily by making them “effectively invisible” in its search results and forcing vendors to use its “costly” logistics network. “Most sellers must now pay for advertising to reach Amazon’s massive base of online shoppers, while shoppers consequently face less relevant search results and are steered toward more expensive products,” according to the complaint, filed in federal court in Seattle... “Our complaint lays out how Amazon has used a set of punitive and coercive tactics to unlawfully maintain its monopolies,” Lina Khan said in a statement... The heavily redacted complaint detailed ways in which it said Amazon built up and maintained both an “online superstore” attracting hundreds of millions of shoppers, and an “online marketplace” where other vendors could sell their products, creating a behemoth of goods and data that would-be rivals could not match... To maintain this alleged monopoly, the FTC said Amazon used a “sophisticated surveillance network of web crawlers” that monitored whether Amazon sellers were offering their products cheaper on other sites, and punished sellers who did so... The lawsuit also alluded to an Amazon pricing system internally codenamed “Project Nessie”, which the FTC said had boosted the company’s profits.

The novelty of this anti-trust action is that it deviates from the standard of consumer welfare, and directly takes on the issue of market structure and competition, both of which courts in the US have so far refused to entertain. To this extent, this will be an effort at redefining the paradigm on anti-trust actions in the US.  

Matt Stoller has a very good article that illustrates how the free-shipping of Prime Consumers is a Click-Bait and consumers pay a hidden tax that's borne by the retailers selling on Amazon and passed on to consumers. The article is a good summary of Amazon's business model now.

In 2022, Amazon CEO Andy Jassy said this explicitly, “small and medium sized” sellers use Amazon not because of the “eCommerce software” Amazon provides but “because they get access to a few hundred million customers.” There are extremely high switching costs to move from one online superstore to another, so this is a business with significant barriers to entry. Indeed, this barrier to entry is baked into the very structure of Amazon Prime and its free shipping, which was created, Jeff Bezos said, “to draw a moat around our best customers”... Amazon’s strategy is to use Prime to build, extend, and fortify barriers to entry. One result of Prime is that Amazon now has an overwhelming monopoly share of online shoppers. And online shoppers aren’t the customer, but the product that Amazon brokers to third-party sellers, who must either pay Amazon what it demands or lose access to the market. As one seller put it, "We have nowhere else to go and Amazon knows it."

Once it achieved monopoly power, Amazon squeezed on price through fees to third-party sellers. As a third-party seller, you pay fees for listing on Amazon; for using Amazon’s warehouse services, known as Fulfillment by Amazon (FBA); and for advertising services. If you don’t pay, you don’t get put in a place on the site where consumers click. "Advertised products on Amazon,” reads the complaint, “are 46 times more likely to be clicked on when compared with products that are not advertised." And these fees have all increased steadily over the years. At this point, the price Amazon charges these third party sellers has grown to nearly 50% of its revenue. It is this money, estimated at $123 billion in total last year, that pays for “free” shipping, as well as its video service, its music service, Twitch, and everything else that comes bundled with Prime. These third-party sellers in turn raise their prices to consumers, aka you and me, and then send that money back to Amazon in the form of fees. It’s basically money laundering.

Apart from network effects, there's one more reason why Amazon's sellers cannot also sell at lower price on another platform,  

Today, Amazon tells sellers that if it detects a lower price for their products on any other online store, they will be punished, which is to say, their ability to get their products onto a place on the Amazon website where customers click will go away. The net effect, as Amazon itself wrote, is that "prices will go up"... It is able to block third-party sellers from going elsewhere, and therefore also stop potential rivals from gaining share. 

This is an FT long read on the FTC's case against Amazon. This is Lina Khan's famous 2017 paper on Amazon. 

The article points to an important point that highlights why this would a hard challenge for FTC

If the FTC wants to impose tough sanctions on Amazon, it will have to also persuade the public that a company whose services so many people find incredibly convenient and efficient is actually harming their interests. “You just could not be going after a more popular corporation,” says David Balto, a former policy director at the FTC. A win for the FTC could mean that consumers end up facing “higher prices and weaker services” on Amazon, he adds. “Consumers aren’t going to be happy with that . . . Ultimately, the consumer is sovereign at Amazon, and what [the regulator is] condemning are things that are responses to consumer demand.”

9. Bain Capital reports of declining returns of South East Asian conglomerates.

10. FT's Alan Beattie is an ideologue of trade liberalisation and is therefore naturally angered by the EU's threats to impose anti-subsidy duties on imports from China of electric vehicles. Their volumes have surged in recent months and now threaten to outcompete the European domestic EV makers. This is a repeat of what happened with the likes of clothes, shoes, solar panels etc. The heavily subsidised Chinese manufacturers reengineer and perfect products that compete in foreign markets, even as its own domestic market is rife with increasing non-tariff barriers. 

There is no free trade or comparative advantage theory that's relevant here. The question that European policy makers should be asking is whether it wants to protect its domestic EV industry or not. If so, it has no choice but to level the playing field and either itself heavily subsidise its EV makers or impose meaningful enough trade restrictions. In the absence of the former, the latter, howsoever much it is against the orthodoxy, is inevitable. It's a strategic choice in national interest (as different from purely commercial or economic choice) to limit Chinese imports. 

The problem is that trade restrictions alone is not sufficient to prop up the European EV industry. It would require complementary measures, especially urgency and vision from European car makers to catch up and create world-class EVs. Unlike developing countries, European countries are better placed to catch up. 

So I'm not sure what's the tree that Beattie is barking up!

11. The surging sales of obesity drugs Ozempic and Wegovy, manufactured by Danish company Novo-Nordisk, threatens to distort the country's economy. This has drawn comparisons with the fate of Finland following Nokia's spectacular rise and fall. 

Ozempic, a diabetes treatment that celebrities take to lose weight, and Wegovy, an anti-obesity medication, have propelled Novo Nordisk to become Europe’s most valuable company and single-handedly stopped Denmark from falling into recession. At $410bn, Novo Nordisk’s market capitalisation is now larger than Denmark’s annual GDP of $400bn last year, raising concerns among officials and business figures that the country’s fortunes have become too closely tied to a single company. “The way that we look at it is that in Denmark we have a two-speed economy: the pharmaceutical industry — and the rest,” said Thomas Harr, chief economist at Denmark’s central bank. “The risk is that you think the economy is performing better than it is.”

After it found success during the first wave of mass adoption of mobile phones, handset maker Nokia’s profits collapsed from the 2000s onwards after the release of Apple’s iPhone. At its peak, the company provided a quarter of Finland’s corporate tax revenues and accounted for 4 per cent of GDP. With that sharply reduced, the Nordic economy struggled to grow at all during the 2010s... Denmark’s economy expanded by 1.7 per cent in the first half of this year compared with the same period in 2022. But stripping out the pharmaceutical sector — which is dominated by Novo Nordisk — GDP would have fallen by 0.3 per cent.

12. Fascinating portrait of Binyamin Netanyahu

He has been compared in the Israeli press to a “weather vane” blowing with the wind... Elkin, the former Likud minister, believes that Netanyahu’s sole governing ideology is his own survival. “He began with a worldview that said, ‘I’m the best leader for Israel at this time,’” Elkin says. “Slowly it morphed into a worldview that said, ‘The worst thing that can happen to Israel is if I stop leading it, and therefore my survival justifies anything.’ From there, you quickly reach a worldview of ‘The state is me.’ He believes in it wholeheartedly.”

The important role of Sara Netanyahu in Bibi's radicalisation since 2015 and the current proposal to weaken the Supreme Court is nicely described in the article.

13. Finally, on the remarkable appeal of Taylor Swift.